Mortgage Rates & Housing Market Insights: Is Now the Time to Buy?

We will never see 3% mortgage rates again, ever. The mortgage industry is really tough, though, because mortgages is based on just like, are rates good? Is it a good time to buy a house? Today, the Fed formally announced they're not cutting rates in July 2025. What's interesting is that this week is actually the first time in over three decades that there were two formal dissenting opinions on that Fed decision. You explain how the Fed actually works. the actual group of people that set interest rates is called the FOMC, the Federal Open Market Committee. It has 12 voting members. So Powell's vote is one of 12. All economists understand that price fixing and price control don't work. And yet we allow price fixing and price controls to set the supply and demand of money, like the price of capital, which is what the Federal Reserve does. Is it a good time to buy a house? Let me just pick that apart piece by piece. But the more important question is, is it a good time to buy a house compared to less? Alright. On today's episode, we're going to talk about is it a good time to buy a house? We're going to get the inside scoop on interest rates because, Tim, you're the only person in the entire world that knows what's going to happen. Winky face. Yeah. I know exactly what's going to happen. You should always listen to me no matter what. Right. We got Tim Chermak, who's no stranger to the show. And, Tim, you're biased potentially, but what I love about you is even though you own a mortgage company. you tend to be really level-headed around conversations on should you buy and conversations around the interest rate. I remember back in the day you said, this is bad for my business. You're saying they should not lower interest rates. And that I'm literally going against my business incentive. I would love to know, do you regret saying that now being in the mortgage business literally during the worst time to be running a mortgage company? Oh, well, I mean, it's actually worse than that, Caleb. My My personal financial situation, like my, you know, my career, I own a marketing agency. So we have a social media marketing agency that actually specializes in working with realtors. So it's not like a diversified marketing firm where we have clients in law and healthcare and consumer goods or whatever. It's like we work with real estate clients. And then on the side, I also own a mortgage brokerage. Yeah. So like my, my income is extremely derivative, honestly, of like, is it Low interest rates? Is it cheap money? Are people buying and selling houses? Is that specific subsector of the economy doing well? When it is, my business is prosper. I mean, we're doing fine right now. Our marketing agency, even though the real estate sector has been kind of depressed the last couple years, we're doing fine because our specific clients are doing well because our marketing works. The mortgage industry is really tough, though, because mortgages is based on just like, are rates good? Is it a good time to buy a house? You know, hence. Hence the topic of the show. But I say all that to say I should be at least on paper even more biased than how you introduced me because both of my businesses that put food on the table for my family and pay our bills, both of them are very, very sensitive to what the Federal Reserve is doing with interest rates. And yes, in the past, I have absolutely kind of gone against the grain and said, hey, even though this hurts me, not indirectly, but pretty much directly hurts me. Like the Fed should raise rates or keep them higher. They should not cut. And I know this episode will probably come out in a couple of days or a couple of weeks, whatever. But at least as of today, like a couple hours before we hit record today, the Fed formally announced they're not cutting rates in July 2025. And some people wanted them to, but I think most people expected they would keep them where they're at. What's interesting is that this week is actually the first time in over. three decades so actually over 30 years that there were two formal dissenting opinions on that on that fed decision so they usually try to even if they internally aren't like unanimous and how they're voting on certain stuff they try to present a united front to the public of like hey we all generally agree that this is the right way to go because the markets like you know some sort of predictability or stability the markets like to think that the fed knows what it's doing right so Usually, even if they have some quiet internal disagreements or nuances on certain points of when they're going to raise rates, cut rates, etc., they try to present a united front to the public. This time, Waller and I forget the other Fed governor. I can't remember his name off the top of my head. But Waller definitely dissented. And when you dissent, it means that, hey, I don't just have a minor disagreement with what the FOMC is doing. I really disagree so much so that I want it to be publicly known and go on the record that I completely disagree. And then you write a little dissent. So it's kind of like with the Supreme Court, you can dissent. Do you think it's something to do with like they're trying to appease Trump in such a way like they're all getting to the room? They're like, hey, guys, this is what we're going to do. I'm going to take one for the team. I'm going to be like and we're going to be like, do you think that's what's happening? That's certainly part of it, I believe that But part of the reason that Waller specifically is dissenting is that they're kind of trying to jockey for position right now to see who will be the next chairman of the Federal Reserve, because it'll still be Trump's term next May. Next May is when Powell's term expires. And so Trump will get to appoint the next chairman of the Federal Reserve in May. And obviously, if you kind of become. uh dovish on inflation this next year and it looks like you're supporting trump's policy agenda which is effectively let's let's lower interest rates right right um which makes perfect sense that trump is all aboard the let's lower interest rates train because he's a real estate guy like his whole career he just associates low interest rates with being like inherently good right and we can debate that all day long but there's there's two of them that dissented that said that We should have lowered rates in July, but they didn't. They kept rates the same. The next meeting is now September 2025. So the kind of benefit is that there'll be two full months of data that come out before the next meeting. And markets are kind of split, at least right now, 50-50 of whether or not they'll lower rates in September. Honestly, if I was a betting man, I don't know if I'd bet they cut them in September, but I'd be pretty confident that they will cut by the end of the year. Um, and I mean, honestly, it doesn't matter a whole lot. Let's, let's be honest. Like when they cut, they're probably going to cut 25 basis points. So it's not going to be some massive cut that just immediately jolts the economy with monetary adrenaline. You know what I mean? 25 basis points is not going to make a bad investment, a good investment or vice versa, you know, but it just means that they'll finally start the, start the rate cutting cycle. So maybe by next spring, so like spring of it. spring of 2026 it means that rates might be 50 to 75 basis points cool how to before we answer the question on frameworks around should you buy a home is the right time to buy a home and all can you explain how the fed actually works and what is what what's actually going on with this whole like are we going to cut rates are we not we've seen trump kind of like have public beef with Powell. And it's I mean, I'm sure you've seen it where they're like side by side and like Trump, like can't help himself to just jab him. And it's just like even like physically jab him. So, yeah, I argued a lot with people on this last year, Caleb, that they're like, oh, Powell lowered interest rates because he was trying to help the economy right before the election. And, you know, there's all these conspiracy. conspiracy theories online of people saying that the Fed cut rates leading up to the election to help Kamala or help Biden, you know, to help make the economy look better than it was leading up to last last November. And they're like, oh, now Powell's doing it again. He's refusing to cut rates when he should be cutting rates. And let me just pick that apart piece by piece, because that is just wrong. There's a lot of things about monetary policy when you get to talking about the Federal Reserve, how it works. It's kind of like. depends on your perspective or there's lots of nuance but there's some things i can just say that are unequivocally objectively wrong um for for starters jerome powell is actually a registered republican um i saw a stat recently maybe you can post in the show notes but it's like 95 of the people who work at the fed are actually like left-leaning democrats but powell is the rare exception where powell is actually a publicly registered republican so we know that powell is a Republican. Jerome Powell himself would not do something to screw over the Republican Party, even if we accept for a moment that let's say he was willing to do that and damage the integrity of the Fed and make like a politically motivated decision. Like, yes, but to be fair, he wouldn't be the first Republican that didn't like Trump. But I tend to agree with you. But the Lincoln projects made up of registered Republicans that hate Trump's guts. Yeah, I mean. he was appointed by trump though so he's like it just doesn't it it doesn't add up on that merit alone but more importantly than that uh jerome powell is not setting interest rates so when people say oh powell refused to cut rates or powell cut rates leading into the last last election What actually makes the people at the Federal Reserve, which employs whatever, hundreds of people, maybe even thousands of people, I'm not even sure how many people totally work there with all the economists and stuff they have on staff. The actual group of people that set interest rates is called the FOMC, the Federal Open Market Committee. It has 12 voting members on the FOMC. So Powell's vote is one of 12. His vote is just as equal as the other 11 people on that. board so powell does not single-handedly sit at his desk and just you know on a whim decide what interest rates are going to be for the united states right he's just one of 12 votes now he has a little bit maybe more cultural or social sway because he's the one who often goes on the press conferences and he's the one issuing the statements and whatnot you're saying he doesn't have the full power to like and most people don't know that because there are 12 people who vote Why does Trump just call Powell out and not the whole board out? Because it's easier to do that. It's politically easier to blame one guy. And honestly, most people don't understand how the Federal Reserve works and how the FOMC sets interest rates. And so they just assume, oh, this Powell guy is an idiot. He makes an easy villain, right, if you can blame it all on one guy. So that's the first thing I think the average person doesn't understand is it's not literally Powell setting interest rates. It's 12 people voting on it. And as of the last meeting from the spring, they were pretty evenly, like pretty much 50-50. They didn't know whether they should be raising rates or lowering them. The general consensus seems to be that we're at a neutral or we're at least close to a neutral rate right now, where rates are at today. And what a neutral rate means in terms of monetary policy is it's where the interest rate is neither too high nor too low where it's neither like sparking artificial economic growth, but it's also not restricting economic growth at all. It's kind of like the Goldilocks rate. And there's no official way to prove where the neutral rate is, but they seem to think they're kind of at a neutral rate right now. I don't think they should have cut rates. Like I think they made the right decision today. And here's, here's what the stock market recently hit all time highs. Now, you, Caleb, and I'm sure your audience knows that the stock market is not synonymous with the economy. It's very possible for the economy to be great and the stock market sucks. It's also possible for the stock market to be great and the economy being weak. That, I think, kind of describes where we're at right now. The stock market is hitting all-time highs, but the general actual core economy is really not very strong. But I think it's more accurate to think of today the stock market as like a proxy for inflation. So if you're hitting all-time highs in the stock market, what that tells me is there's still plenty of inflation in the economy. Unemployment is very low. It's basically at full employment. Like anyone who wants a job in this economy can find a job. There's not people out there looking for jobs that can't find them. So unemployment is very low. The stock market is hitting all-time highs. We just got the GDP report for Q1, and it was very good. Like the economy was actually growing like this year above and beyond expectations. And so when you add all that together, the cumulative picture of the economy is not one that demands rate cuts, because the only time even if you buy into Keynesian economics, which I personally completely disagree with, even Keynesian economists would say that the only time you should cut rates and kind of like try to artificially stimulate the economy is when the economy is like nosediving. and unemployment is going up and you've got to like spark some economic growth so then they unleash you know new money into the economy via lower lower interest rates but like none of that is true right now right and and explain how that works because again i find that you know when we talk about printing new money and all of that it's like what are the benefits of lowering rates makes it easier for businesses and people to borrow, which the idea is. that is going to stimulate the economy because you're incentivizing me to create activity. But that the downfall to that is higher inflation. What are some of the downfalls? Like, why aren't all the rates at zero? Like, do you want to explain that versus like the thought process of like, inflation's out of control, let's raise rates, which is means like, so explain to me in Tim's words, like how the interest rate game works and like the philosophy on like, on that. So I have to add the preface that I don't think the Federal Reserve should frankly exist at all. Because if you believe in free market economics and you believe that. like free people left to their own will make the right decisions if you give them freedom why do we understand like all economists understand that price fixing and price control don't work right and yet we allow price fixing and price controls to to set the supply and demand of money like the price of capital which is what the federal reserve does so i think we shouldn't have a federal reserve at all and we should truly let market interest rates determine whatever interest rates should be right but Fact is, we do live in a world where the Federal Reserve exists and the government basically sets interest rates based on what they think they should be and to help them achieve their their political goals and agenda. So it is what it is. The Federal Reserve exists. So the theory, according to people who work at the Fed, which are all they all live in this Keynesian world where they believe the government can spark the economy with growth, with low interest rates, and they can kind of. Which, by the way, you're a couple thousand off. There's 20,000 people across the entity. I know it's not just that. This is your lean way of thinking. They have a whole bank in Atlanta, a bank in Dallas, Minneapolis, Kansas City, etc. So that makes perfect sense that, yeah, there's a lot of people that work at the Federal Reserve system. But according to them, how they think this works. is that when you lower rates, you're obviously, it's the Fed funds rate, which is the rate that banks can borrow from the Fed from. And so if banks are getting the money cheaper, it means they can make their loans to people cheaper. So if you're getting an auto loan for a car, you're getting a mortgage to go buy a house, it's what rate you can borrow at on a personal line of credit that extends to business loans for businesses. And if businesses have cheaper you know access to cheaper money they can offer their products for cheaper they can more easily invest in growth and hiring so whether you're building a new business whether you're need some money to pay for r d or invest in new machinery for your business if you're a farmer that needs to get a new combine you can go finance that at cheaper rates and then obviously you have new equipment the local john deere dealership has more money they can hire more people you know if money is cheaper it's easier on the surface for it to look like the economy is doing well because everything's cheaper right but that's not necessarily that doesn't necessarily equate to economic growth right um on the other side if you raise rates the opposite occurs if you raise rates and everything gets more expensive because loans are more expensive it means a farmer is less likely to go buy a brand new john deere combine a family is less likely to go buy a brand new chevy suburban they might just try to eke out a couple more years out of their current beat-up old minivan or whatever So because they're not buying a brand new Suburban, like the local car dealership doesn't make that sale. It's true of everything. The clothes you wear are cheaper when interest rates are cheaper because clothing manufacturers can ship stuff and hire people and do everything cheaper when rates are cheaper, right? So it's like this blunt force instrument where when all you're holding is a hammer, everything looks like a nail, right? If you think you can speed up the economy by lowering rates. Why wouldn't you do that all the time? Right. And the answer is, well, because inflation would get out of control. And so the Fed right now is trying to avoid the mistakes they made in the 1970s. Explain that. Why is lowering rates? Why would that make inflation go out of control? Yeah, it's actually pretty straightforward. If the Fed lowers interest rates, it unleashes extra money into the economy because banks will loan more out. If rates are cheaper because then your dollars are less valuable because there's more money in the there's more money out there. Dollars start circulating faster in the economy. You get more M2 velocity and there's literally more dollars in circulation when interest rates are lower. So there's higher interest rates, less money in economy, your dollars that worth more today and in the future. Yeah. So what the Fed tries to do in theory is they're trying to keep inflation at a constant 2%. Now, anyone who's tracking this stuff knows that in the last couple of years, inflation has been nowhere near 2%. It's been more like 5% to 10%, and I would argue a lot higher because of how they manipulate, how they measure the basket of goods for CPI. We could nerd out on this all day long, but they're still not close to 2%. The idea is that if you're at 2%, most people won't make it. everyday purchasing decisions based off of inflation expectations. So the Fed is trying to avoid a situation where the average Joe out there is literally thinking about inflation when he's thinking about buying a new t-shirt or buying a new truck or buying, like they don't want inflation to even factor into people's decisions. And right now it kind of does because inflation has been elevated for a while. So at least according to Keynesian theory. the fed can speed up the economy and make it better by lowering rates and they can slow it down by raising uh raising rates but it's kind of like the analogy i always use it's like if you go out and get absolutely hammered on a friday night it's like well you're gonna have a hangover on saturday morning right and the only way that you beat a hangover really is you don't drink anything you get plenty of fluids and you just have to suffer the consequences and like endure the pain for a couple hours from the poor choices you made the night before. So you hope that the choices you made the night before were worth the pain of the next morning. We had like a zero interest rate policy for like a decade where rates were artificially way lower than they would have been in a free market for a long period of time. So right now we're living through that economic hangover period where the economy has to deleverage a little bit and things are going to be slower. but that's the price you pay for we spent so long with cheap rates. So the Fed is kind of paying the piper right now. The last thing I'll say on that is Powell has said multiple times in his press conferences and other various interviews that he is trying to avoid the mistakes that the Federal Reserve made in the 1970s because the 1970s was basically one decade-long stagflation recession. where they're uh have high high inflation and high unemployment and it's because they cut rates too early like three different times in the 1970s like they thought that the economy had recovered they thought that they had extinguished inflation and three different times in the 1970s the fed said okay we're in the clear let's start cutting interest rates and they did it too early and then inflation came roaring back and if you put on your trump hat the reason he wants to lower interest rates is he wants a booming economy when he's in office or what's the is there a pitch to be said that it would actually help america long term or is it is it just like hey i want i want this i want my three and a half years to go out with the bank there's a there's a two kind of narratives there first is that trump wants the economy to be good during his term so that it looks like he did a good job with the economy and a lot of it has to do with what interest rates are doing right um and obviously the midterms are coming up next fall so like a year from now we'll be in the midterms and so uh interest rate cuts that happen this year and into next year will absolutely help determine what the economy feels like yeah the average person going into next summer and next fall so if the economy is doing well because interest rates are if it feels like it's doing well right then it's more likely that Trump and the Republican Party can kind of hold some of the seats they have in the House and Senate and so forth. But the other narrative here is that the national debt is at like a crisis level. And so we're having to refinance so much of that short term debt at really high interest rates that Trump is basically begging, hey, please lower interest rates so that these trillions and trillions of dollars on the national debt can be refinanced at lower rates. and here's where powell is kind of being honestly somewhat heroic it's kind of weird hearing those words coming out of my mouth and saying a member of the federal reserve is doing something heroic because like i said i believe the federal reserve shouldn't exist but powell is resisting these efforts by trump to smear him in the media because he's saying hey it's not my job to like enable you to increase the national debt and make it easier to deficit spend and make it easier for the united States. to have these trillion dollar deficits my job is to make sure inflation is at two percent and so he's basically telling trump and congress like if you're running multi he's not saying this directly but this is what he's saying without saying right that if you're running multi-trillion dollar deficits don't expect me to enable you by lowering interest rates because that's on you not me my job is making sure that inflation is at two percent and like caleb it's been decades probably back till Volker. in the early 1980s that we had a chairman of the Federal Reserve who had the balls to actually do the right thing and not just immediately lower rates because that's the politically popular thing to do. So. Love it, man. Okay. Let's use the rest of our time together to talk about the question, should I buy a house? Because if you look at the data, it would seem to be that a lot of people are sitting on the sidelines. A lot of people are not selling because what are you going to do? If you sell, are you going to rent or are you going to go by. No one wants to move from a 3% mortgage to a 7% mortgage. Right. And so, which leads to the question around... you know i've and i've done content recently on on the show talking about running the numbers renting versus buying thought processes there and um one of the one of the things that i didn't mention in that video that i think i probably should have if i'm if i'm trying to paint the pictures in both site or like equally is you just like i said just because you decide to rent doesn't mean that's your identity the next 30 years same thing could be you could buy at 7 or 8 Doesn't mean you're locked into that rate for the next 30 years either. Like just like Trump wants to refinance the national debt, there could be a strategy to say, get in if you can survive the payments. And then when rates go down, instead of selling and then buying a house, it's going to be more expensive because they're pricing in the rate. The rate is just essentially making your house more expensive. You could make the argument to say, get into the house, hold on. If and when interest rates come down, refinance. But then the next question is, are they ever going to get down to 3% or 4%? That's the other question. With current American deficit spending, with how much money, I want to be clear, both Republicans and Democrats are guilty of this. So it really doesn't matter who's in office, whether the Republicans have a majority or Democrats. Both Republicans and Democrats love spending way too much money. And so if we can it's this straightforward, Caleb. If we continue to have multi-trillion dollar deficits where the United States federal government is bringing in $4 trillion a year but we're spending $6 trillion a year, we will never see 3% mortgage rates again ever. You can take that to the bank. It's just impossible to have So in your just before we answer the question, how low because I don't believe we're just going to stop spending money. And so how low do you think is the is FI the new floor, do you think? Or like I'm just calling it out. With the current rate of deficit spending, with what we're spending and also just the interest on the national debt that we're having to pay every year, and they're issuing more treasuries every year to cover the interest. So it's not like we're chipping away at the principal year by year. They're just issuing new debt to pay off the interest, right? It is very, and again, I work in the real estate and mortgage world full-time, so this is not like an uneducated opinion. It's very hard for me to see a world in which mortgage rates come below 5% anytime soon, unless there is like major structural reform in the American political system, where like we actually start spending less and they reform Social Security and reform Medicare, and frankly, they stop. spending $2 trillion a year more than we're bringing. What are they now at this point? Mortgage rates as of this recording are pretty close to seven for most people. Now, if you have really great credit and you maybe have a buy-down occurring, some people are getting rates in the mid-sixes or even potentially low-sixes. But for the vast majority, the average person, mortgage rates are basically seven. Well, and this will be a way for me to plug your business. If you're in the market looking to refinance, looking to buy a new home, want a second opinion, John Galt Mortgage Company, we'll have the link down below. It's a great company. You should check them out. It's your shameless plug. All right. So let's talk about the framework on should you buy, should you not? How would you go about that? My answer is actually very simple. Do you want to buy a house? would it make you happier? And can you technically afford it? Even if it's not ideal, like if you can afford it and you're like, Hey, I'm comfortable looking at this monthly payment and this is the right house for my family because, uh, you and April, you know, have one daughter right now, but let's say in the future you have one or two more kids and all of a sudden, you know, let's say you and April are living in a house that was 1600 square feet. And that was fine when you had one, you know, baby daughter. But all of a sudden, if you have two or three more kids, it's like you're getting a lot more than 1600 square feet. You're looking for a house that has 3000 or 4000 square feet. At that point, it's like it is absolutely financially uncomfortable to upgrade from a cheaper mortgage rate to buy a bigger, more expensive house. And your interest rate might be six or six and a half or seven. Right. But your lifestyle and your happiness. should be the main driver of that decision, not what the monthly payment is. And I don't mean to sound so esoteric like, oh, if you don't have money, then let them eat cake. But way too many people. And again, I say this as someone who owns a mortgage brokerage. Way too many people, I think, are treating their house as an investment and an asset. And they're thinking of it and like, is this a good business decision to buy a house? It's like, well, the house you live in is not a business decision or an investment decision. It's a consumption decision, no different than the car you drive, right? And so if it would make you happier, like if it would make your life better, having a slightly bigger house because you have a growing family. then yeah it's going to cost a lot more and that sucks but if you can afford it i'd say yeah go do it because the house you live in should like you should not make that decision on does this maximize my net worth is this a good time to buy or sell a house you you absolutely should be using that kind of investment calculus when you buy stocks or buy bonds or look at buying businesses or acquiring other investment assets whether it's crypto or whatever um that's a you know that's a like a like a P and L decision, right? When you're buying a house or a car, I tell people the same thing on a car. I'm like, I don't know. Is this car a good deal? Is this a wise decision to buy such and such car? I usually ask them like, does it make you happy? And can you afford it? Because if you can't afford it, then the happiness question doesn't matter. But if you can afford it, like don't look at whether buying this car is a good financial decision because it's going to go down in value, no matter what you do, it's going to be worth less than two years. And that's worth right now. the question is is is that worth it to you do you have the money right way too many people because realtors have told this to people for the last several decades you know they say hey houses always appreciate and value you want to build equity for yourself not your landlord there's all these kind of tag lines that they use to make you think that by you know the house you live in is this great investment and the american dream is owning a house because home values always go up and to the right it's like that's not necessarily true it was maybe true 30, 40, 50 years ago, but that's not necessarily true anymore. So I just asked. And with the help of the low, historically low interest rates that we'll most likely never see in our lifetime again, it's not like that's going to be repeated either. Yeah. And also massive population growth too. Right. So, I mean, there are many, many factors that made real estate an amazing investment over the last 50, 75 years that I'm not saying it's no longer true, but it's not necessarily. So your framework is. your house is not an investment don't look at it as an appreciating thing that's gonna be your best best asset but you're also saying if this house leads to your happiness like factor like factor that in and there's a lot of people that might not be making a decision because they're trying to be too analytical about it and and so you're like How do you factor in happiness and how do you factor in can someone afford it or not? It's not a business decision. So don't turn something into a business decision. A consumption decision? Yeah, it's a consumption decision no different than can we afford to go on this vacation? And the vacation will cost money and will it make us happy? That's a question you have to ask. So then here's a question. If the identical house, if you could have the identical house, the identical experiences, but one house you own and you're paying a mortgage and the other house you're renting, What gap would have to what would be the gap to be where you would decide to rent over own? Because I would assume, even though your house is not an investment, the fact that you could potentially refinance, the fact that you're getting return of premium or essentially you will essentially get your money back. It's a worst-case scenario over savings account. Yeah, for savings account. So it's like if let's just hypothetically if one was $500 more than the other, I would own for $500 more extra for the same experience. Like that's just that same price, same experience, $3,000 different, $4,000 difference. Then you start like, Oh yeah, actually running the math. I would honestly say go with your gut because your, your gut and your happiness is going to tell you like, Hey, if owning a house is $2,000 a month, more expensive than renting probably for you and I. we're going to buy a house because $2,000 a month to you or I isn't like a crazy amount of money necessarily, but to the average American, $2,000 a month is probably a lot. For the same house though, yeah, I would have to think it's $2,000. Yeah, but I'm- You know, like everyone's financial situation is different. So I really can't give blanket- I hear you. One thing I think is interesting though, is that people say, oh, rent and then just invest the difference because- No one's going to do it. In any economy, basically, buying a house is going to be more expensive than renting, no matter what is going on within straight to the economy, because you've got to pay property taxes. You've got to pay homeowners insurance. If the plumbing or HVAC or roof needs to be replaced, you have to pay for that, not the landlord. So you always have to have like a reserve savings to cover, you know, stuff like that that could come up. Owning a house is objectively more expensive than renting. So often people will say, hey, rent a house. And then with the difference of how much you're saving, invest that. The problem is no one actually does that. In the real world, when people are saving $1,000 a month by renting or whatever, they just spend that $1,000 going out to eat more or they go on more vacations. They don't actually invest that. So it's different for everyone. The point that I like the kind of like contrarian point that I believe in is that. If it makes you happy, life is short. And so if you're in your, let's say you're 30, 30 years old, you're recently married, you have two kids and you're thinking you might want more like you and your wife or you and your husband, whatever are thinking, Hey, uh, we want a family, but like, uh, we want a bigger family, but we're trapped in this. 1600 square foot house that makes things really difficult. Right. We'd love to upgrade to a larger house that's let's say 3000 square feet that has more bedrooms, a little bit more breathing room. So, you know, we just feel a little bit happier. It's going to be more expensive if you currently have like a three and a half percent mortgage rate and you. But it's also going to be a different experience. And that's what you're trying to say is like it's going to be more expensive. There's no way around that. So I'm not trying to like tiptoe around that. It's going to be more expensive. The question you have to ask yourself is if your mortgage payment goes up by $1,000 a month or even goes up by $2,000 a month to allow you to afford that more expensive house, also that's at a higher interest rate, right? Would you rather sacrifice a decade of your life in your 30s because your kids are only going to be kids once, right? Would you rather give that up because, oh, we're technically saving? a thousand dollars or eighteen hundred dollars or whatever that number whether it's twenty five hundred dollars right would you rather save that and then live in a not ideal situation for three years or five years or ten years because you're saving money this goes back to my saying that i always tell you like optimize your life for happiness not yeah and the question would be you know if you're in your 60s or 70s and you're looking at your net worth everyone's you know the know, the first million is always the most significant, right? But it's like, would you rather Would you rather have half a million dollars less and have those experience? Like, what are those experiences worth to you? And yeah, there's no, you know, here's Newsflash. If you stay in a one bedroom condo and rent the rest of your life and invest aggressively, your net worth will probably be a bit bigger, way bigger than the person that, you know, buys the house and goes on the vacations and all. And so then you have to say, what are the values of your memories? What are the values of your experiences? And that just goes back to a value deal. I think on the flip side, there are certain people that feel like we've been built like this American dream is this idea of you owning a home. And part of that, you know, you know, is there's a there's a stigma to it. But then there's also and I'm going to kind of go back on what I said in my other video. You can run the numbers, and that's great. And for the people that are running the numbers, they're good. If you're the type of person that's running the numbers, you're good. And if you're watching this podcast, you're good. I just want you to know. So you are a minority. That needs to be a t-shirt. You're the minority. But the majority of people, the reason why, if the numbers are close, why I would be like, if you can afford a home, go for the home, it's what they're essentially doing is they're building in a forced savings tool. And yes, could that be a something that gets them in trouble and would they have to sell the house on pennies on the dollar you maybe and but in a lot of cases what you're going to do is you're just going to create a four savings tool and the sad reality is houses are usually people's greatest asset which just just means that most people suck at investing right but if they were renting they weren't going to invest anything either so at the end of 30 40 years they have no home and no assets And so for those reasons, for I do believe like the goal should be, especially if you're not super, super entrepreneurial or you're not like in love with investing, the goal should be to find a place to buy a home because you will probably your default will be greater. And that's that there's no science to that. That's just like human behavior. And that tends to be true about the people that buy homes tend to not regret that. Like that's the other thing is like how many people regret purchasing? Like I don't. I have a nice home. You've been in it. It's not like I don't I'm neutral about the whole thing. I don't regret buying the home, but I'm not like, wow, this is an amazing decision. But most people that I talk to don't regret buying. There's always some. But I don't hear that all the time. And that's another thing to lean in. My only regret is not buying a house that was double or triple the size of the house we bought recently back when rates were 3%. Yeah, that's fair. And I can relate to that because I bought an area. I bought a house that was way under my means. And looking back on it, I was like, well, those 5% interest rates would have been nice. Yeah. And and so I can I can I can relate to that. So let me answer the question because I know we don't have a ton of time left. I'll answer the question as directly as possible. You ask because I hate when I listen to podcast episodes and people just dodge the question and they're like, well, it depends. Right. So is it a good time to buy a house right now? Absolutely not. It's a terrible time to buy a house right now. It's insanely expensive. The average person's DTI, like how much their mortgage payment is relative to median American income, has like never been higher than it is right now. So people are spending a higher percentage of their monthly take-home on mortgage payments and housing right now than they basically ever have in the history of the United States that we've been measuring. So it is an extremely expensive time to buy a house right now. So to answer your question directly, is it a good time to buy a house economically speaking? No, it's not. But the more important question is, is it a good time to buy a house compared to what compared to renting for the rest of your life compared to waiting for five years when homes are even more expensive than they are right now it's always compared to what and so that's that's why you have to ask like hey if i can afford it bite the bullet um two two quick points i want to make before we have to wrap this up mortgage interest tax deduction i bought a pretty expensive home a couple years ago and a very major part of that decision was when i looked at what the mortgage payment was on paper like versus what the net mortgage payment was once i factored in the interest rate deduction um i'm saving i'm getting more of more than 40 000 a year in a mortgage interest deduction because all the mortgage on all the interest on my mortgage is tax deductible. So the actual amount it costs me, like net, net, net at the end of the year is very different from looking at the monthly payment I'm paying every month. And that, you know, that should factor in, especially for those people that are buying fairly expensive homes. It's a very different decision when you can write off the interest versus when you can't. So that should be factored in as well. And a lot of people forget about that. And then, you know, the last thing I would say is that let's say that you're you're like, man, like I said, I'm 30 years old. I got a couple of kids. We got, we want to have more, but we just can't afford to upgrade our house. Like I feel for you, the people in that situation, like those are the people that the federal reserve and all of our politicians are really screwing over when they constantly print money and run these deficits because the inflation is the reason homes are so expensive, right? It's inflation because politicians can't stop spending money. So those people get screwed over. So I, I feel for you, you're the person who's being hurt. by these politicians in Washington. However, I would argue rather than feeling sorry for yourself and saying, well, I guess we'll have to live in a house that kind of sucks for the next 10 years because we can't afford to move. I would say if the difference is like $1,000 a month would give you a little bit of financial breathing room, don't try so hard to save $1,000 a month. It's fairly straightforward to go to your boss, go to your manager and say, hey, How can I add more value to this company? Just tell them, tell them specifically, because I'm a boss. I employ 50 people. You employ a bunch of people. Trust me. If one of my employees came to me and said, Hey, I want to make an extra thousand dollars a month. What can I do to add so much value to this company that it's a no brainer to give me a raise of a thousand dollars a month, right? I would love to sit down and have a conversation with one of our employees on that. But usually employees don't think like that. They're just nervous to ask. And so if having an extra, whether it's a thousand dollars or 1500 or 2000, whatever that number is, if that's the amount that's preventing you from having enough money coming in to where you can afford the house, that would be right for your family. Don't worry about cutting expenses. Cause at a certain point, like there's nothing left to cut, right? Think about how do I increase my income? I'm going to go to my boss. I'm going to say, I want to make an extra thousand dollars a month what can I do for this company that would add so much value that it's a no-brainer to give me a 12 000 a year raise which is you know a thousand dollars and then now you have the money to afford the house that your family um would be would be happier that's how you should be thinking about this like Capitalism rewards people who add value to the world, not people who subtract joy from themselves. Yeah, I love it. I love it. Two quick questions for you. Question number one is, do you think house prices are going to drop? Because right now they should be, but they're not. Do you think they're going to drop or do you think it's... They're starting to in a lot of markets around the country. straightforward answer is that anywhere where there wasn't a lot of new construction home prices are remarkably stable so basically in the midwest in wisconsin minnesota iowa indiana etc like the midwestern states home prices are actually remarkably stable and they probably won't be coming down anytime soon because they didn't go up a ton during covid anywhere else in the country arizona california texas florida the carolinas georgia tennessee pretty much anywhere else in the country that's not the midwest home prices are already starting to come down and they'll probably come down by an average again every area is different dude so you got to talk to a realtor in your area but i would say over the next six months to a year home prices in many areas of the country will come down five percent or so okay um okay and and if and when interest rates do cut do you see that immediately jolting the economy or do you think it's going to be It's like if someone's trying to be analytical. It'll be gradual because when the Fed starts cutting rates, they don't do it, hey, they're not going to cut 100 bips all at once. They'll cut 25 bips, wait a month or two, maybe cut another 25 bips. So it kind of gradually helps the economy go. By the way, one thing I've learned with Tim, if you want to sound intelligent, use the word bips. That's right. Never say basis points or interest rates. Say bips. People automatically assume you have a graduate degree. So I love it. I would say by next spring, Caleb, here's a really practical piece of advice for your audience. If you're looking at spring of 2026, there's a better chance than not that mortgage rates will be a lot closer to 6% next spring than right now they're at like basically 7%. So I think most people buying a house, if they're able to wait until next spring, will be able to get almost a full interest rate point. But it's just like, are you willing to make that decision? wait, because if you also know what that's going to happen, you could miss the dream house. If there's the dream property there, not nothing saying that that's still going to be available a year from now. Exactly. The last, it's less of a question, more of a statement. And it's to me, but it's to people like me, because I'm sure many people that watch this can resonate with this is stop comparing to what it was. I think for me, I always compare it to talk as toxic trade of mine. I literally will look at a house and be like, what would this be at 3%? And that's just like, what is that? Mortgage porn? I don't know. It's like, I don't know. Like, it's just not a great way of doing about it. I don't know why I do that. I think I just, I go maybe what if, maybe I know my dream scenario, it would do that. But we don't necessarily want that. Like, all the things that may be good for me personally would probably hurt me in the long run because we would be spending money, like we're going out of style. And so that would be my takeaway is. 5% might be the new 3%. And just as a perspective. But that was really practical to think a year from now, not that, or maybe less than a year from now, not that, Tim, you're giving financial advice or loan advice, but it's just like that's a practical thing that we can take. But I like to factor around happiness and sometimes increasing your consumption around something. Buying a home is not the worst thing. you know there's a lot of worse things that you can buy i.e vehicles that might help you be happy but they also depreciate and we we might not be saying houses are going to automatically grow by three percent but there's pretty good precedent that houses are not just going to drop like a rock and so here's here's here's another analogy for people to think of and i'll just leave you with this is like there's there's a lot of people out there that are let's say stuffing 2 000 a a month. towards their long-term savings retirement every month because the people that are listening to this podcast are in a totally different financial mindset and emotional mindset than the average american out there so i'm more speaking to the nerds that are listening to this podcast right now let's say you're you're putting two grand a month away towards long-term savings retirement whether that's roth 401k whole life insurance whatever right um if a thousand dollars a month is separating you from living in the house that would make your family truly happy a little bit more room a second living area a bigger kitchen extra bedrooms for the kids like whatever it is right like why not for the next 10 years while your kids are still kids maybe put a thousand dollars a month towards retirement And then apply that difference of $1,000 towards having a slightly more expensive mortgage payment because your kids are only going to be kids once. You have the rest of your life to snowball that retirement savings, but your kids are only kids once. And I think people think that life is linear and flat, but it's not. Every decade has a different value than the other. So just don't let the numbers of buying a house trick you into thinking it's a business decision. It's totally subjective what will make you happier at the end of your life. I love it. Tim, thank you for popping on. You're always a fan favorite. We'd love to hear your thoughts in the comments. What are things that we missed? What are things that you loved? What are questions that you have? When we have Tim back on, what questions should I ask him? And for those of you that subscribe, thank you, and we'll see you next time.

‍